ᐅ Is a Heat Pump Now More Expensive Than Gas Again?

I’ve been thinking again over the past few days about whether we should replace our existing gas boiler with a heat pump earlier than planned. What initially discouraged me was the fact that subsidies (in a reasonable amount) are only available once the gas boiler is at least 20 years old. But well, pointless regulations and laws—a side issue. I am actually very satisfied with having chosen gas in the past. For example, during screed heating, we consumed many kilowatt-hours, and with a heat pump, you would have to use electric heaters for that (seasonal performance factor = 1). Until spring 2022, we mostly paid less than 5 cents, at the end just over 5 cents.

We currently have a fixed contract with a price cap at 9.4 cents for gas and 30.6 cents for electricity. I checked what options we have once this price cap expires:
- 8.2 cents gas
- 31.0 cents electricity
(both again with a 12-month price cap)

This results in an implied seasonal performance factor of 3.78, above which the heat pump would be more efficient. Yes, there are base fees, but on the other hand, the expected lifetime is also a factor. Currently, everyone claims that a heat pump won’t last 30–40 years like gas boilers have long proven in practice.

I used the calculator from the Federal Heat Pump Association for a low-energy house, 35 degrees Celsius (95°F) flow temperature, VWL 75, 40–50 percent domestic hot water share (matching our current consumption—we have 24/7 circulation and want to keep it; on the other hand, the building was built to KfW 55 standard back then, just not officially certified; for example, no solar panels on the roof since we have a well-insulated house as a compensatory measure [monolithic structure, but good windows, good roof insulation, etc.]), 60 degrees Celsius (140°F) storage temperature (also here: 60 degrees is the optimal temperature to prevent Legionella—we won’t save a few cents per day at the expense of our health), and the calculator shows a seasonal performance factor between 3.66 and 3.78.

You could factor in heat pump electricity prices, but then there are shutdown periods, right? That could be problematic with the 24/7 circulation. The electricity price in that case would be 22.3 cents plus a base fee, a second meter, and so on.

22.3 cents / 3.78 = 5.9 cents per kWh heating energy. Okay—so you save about 414 euros per year at 17,000 kWh. Possibly with problems due to shutdown periods and/or the heat pump’s lifespan (+ initial investment of around 20,000).

If you calculate against a heat pump, you’ll of course end up arguing against it. But that’s just a side note. At least you don’t seem convinced about the heat pump.

The question isn’t what gas and electricity cost now, but what they will cost in the future. Gas prices are expected to rise significantly due to the energy transition. The question is whether that will really happen or if measures will be taken to counteract this, and what will happen to electricity prices. The fact is that the gas infrastructure will be maintained for fewer and fewer users. As a result, even the fixed charges are likely to increase substantially, regardless of global market prices, surcharges, and taxes.

We consciously chose against gas 10 years ago and are satisfied. I don’t need 60°C (140°F) water temperature and didn’t have excessive costs heating the screed.

Considering the resource use involved in manufacturing a gas heating system, I would only consider switching if it really becomes necessary—unless there is a significant imbalance in running costs between gas and heat pumps, or if it’s clear that the gas heating system will soon become unreliable.

I can no longer fully follow your line of thought from about halfway through, but I do see a fundamental mistake: sustainability does not mean discarding existing systems and replacing them with heat pumps and electric cars! Provided the system does not cause significant unaccounted costs somewhere, replacing the system is the wrong approach.

I also find the perspective of the calculation a bit too narrow: the purchase costs of the gas heating system and the opportunity costs of continuing to operate the gas heating are not taken into account. The 20,000 to 30,000 euros are either spent today or invested with interest for 10 years, which shifts the economic viability further in favor of the gas heating. At the same time, however, the calculation could also shift clearly toward the heat pump if a low-cost photovoltaic system were installed on the roof.

In any case, there are so many “ifs” and little gain compared to that, that from my point of view, this only makes limited economic sense because of the subsidies and is definitely not in the interest of sustainability!

Musketier schrieb:

If you calculate against heat pumps, you’ll get a result against heat pumps. But that’s just a side note. You don’t seem convinced about the heat pump, at least.

I’m trying to be realistic based on our actual circumstances. For example, winter 2022/2023 – we also lowered the temperature slightly, out of solidarity. It was always affordable for us. Last winter, we raised it back again. Bending for one year was doable, but not on a permanent basis.

The question is not what gas and electricity cost now, but what they will cost in the future. Gas is supposed to become significantly more expensive due to the energy transition. The question is whether this will actually happen or if countermeasures will be taken, and what will happen with electricity prices. The fact will be that the gas infrastructure will be maintained for fewer and fewer users. Accordingly, basic charges alone are likely to rise significantly, regardless of the world market price, levies, and taxes.

If that happens, adjustments can still be made.

We consciously decided against gas 10 years ago and are satisfied.

Back then, everyone said: Gas heating can be installed later as well because hydrogen will replace gas, and hydrogen will eventually be cheaper than gas. Current projections say something quite different again.

I don’t need a 60°C (140°F) water temperature and didn’t have exorbitant costs during screed heating.

60°C (140°F) and circulation minimize the risk of Legionella (and circulation is very convenient and is mandatory in every multi-family building – so having no circulation in a single-family home would actually be a step backward in terms of comfort). As with risks, they may never occur. That’s clear.

Just considering resource use for manufacturing the gas heater, I would only switch if it’s really necessary, as long as there is no significant imbalance in operating costs between gas and heat pumps or when it’s clear the gas heater is about to fail.

At the moment, as in recent years, it still looks like gas heating is cheaper. I wouldn’t install a new one, though. Price-wise, I think it was right to choose the gas heater back then. It doesn’t cost more than $2,000 (plus another $2,000 for installation), so roughly ~$4,000 (we also had a general contractor who broke these costs down for us – $5,000 for the gas heater including a hot water tank, and $5,000 for solar collectors, which we did NOT have; ground-source heat pump including tank and drilling was about $40,000 back then).

I’m just considering whether switching makes sense now. I have already mentally written off the $4,000–$5,000 for the gas heater because we heated for many years at 4.5 cents, later 5.0 cents per kWh, and it has more than paid for itself several times over (also taking into account higher interest costs if we had chosen the expensive heat pump – in which case the loan would have been higher).

Dahlbomii schrieb:

I can’t fully follow your reasoning from the middle onwards, but I see a fundamental mistake: Sustainability does not mean throwing out existing systems and replacing them with heat pumps and electric cars! Assuming the system does not cause significant unpriced external costs anywhere, it is wrong to replace the system.

Well, but that’s exactly the mainstream approach. Combustion engines sent to Eastern Europe, where they rack up a few hundred thousand more kilometers, instead of here. Meanwhile, a new car is produced – that’s the intention when disadvantaging combustion engines (with special parking spots for electric vehicles, partly with separate “eco lanes” in some cities, etc. – which only leads to more consumption). The story with inner-city diesel bans (which then simply shifted these vehicles to Eastern Europe while new combustion engines were produced here) will likely repeat itself soon in a similar way (with another yet-to-be-invented justification; wasn’t direct injection once the issue?).

I also think the perspective on the calculation is too narrow: The purchase price of the gas heater and the opportunity cost of continuing to operate it are not accounted for. The €20,000–30,000 (~$22,000–33,000) is either spent today or lost as interest over 10 years, which shifts the cost-effectiveness toward the gas heater. At the same time, the calculation could also shift significantly toward the heat pump if there were an affordable photovoltaic system on the roof.

You are right. The electric car only makes sense with photovoltaics. Photovoltaics don’t make sense compared to an ETF. The heat pump doesn’t really benefit from photovoltaics because the heat pump needs electricity in winter, when photovoltaics produce nothing—that means self-consumption is already maxed out by household electricity. And in a comparison of photovoltaics with self-consumption versus ETF, the ETF wins.

In any case, there are so many “ifs” and little gain that, in my view, it only makes slight economic sense because of subsidies and is definitely not sustainable!

I just suddenly thought: Hey, you wanted to look into heat pumps back in spring 2022. Everyone was rushing into it then, so I thought: I’ll check later. I try to act as counter-cyclically as possible because it was obvious that spring 2022 prices were sky-high.

Now, in summer 2024, I think: Well, now that things have normalized, let’s recalculate. And look: 8.2 cents vs. 31.0 cents. Oops, it doesn’t pay off anymore!?

Hello,
what you are doing right now is deliberately calculating the heat pump in a negative way. That is just as reasonable as calculating it positively. What will be correct, you will only know in 10-20 years. I am currently facing a similar consideration; we built with a gas heating system 8 years ago, and I am thinking about replacing the gas heating prematurely.
And it is true, financially it certainly makes little sense right now to remove a functioning gas heating system and replace it with a heat pump.
But like any investment, a heat pump is a bet on the future with many unknowns:

• The development of gas and electricity prices is difficult to predict, but it is likely that the ratio of kWh prices, which was about 1:4 (gas to electricity) until 2022, will increasingly shift in favor of the electricity price in the future.
• Yes, ETFs have averaged returns of 5-7% over the past decades. You won’t get such a return in an economic calculation for photovoltaics and/or a heat pump. But no one guarantees that future returns will look the same. The current global situation is unprecedented, and no one can predict where things are headed.
• Installing a heat pump now will almost certainly protect you from having to switch to district heating later. Once mayors and local utilities realize they can generate virtually unlimited prices and profits through mandatory connections and hand lucrative contracts to their networks, a huge gold rush will start. Simply connecting to district heating will cost about the same in a few years as a heat pump does today. Digging up your garden and laying pipes is expensive... And afterward, you are completely at the mercy of the district heating operators’ pricing. According to current legal opinions, a mandatory connection for a heat pump cannot be enforced.
• If you wait until your gas heating fails, you will face a big problem getting a heat pump at a reasonable price on short notice. This usually leads to installing another gas heating system again, which you then have to replace with a heat pump after 3 years. That makes even less sense.
• A heat pump does not cost the 20-30k€ as Dahlbomii suggests. I have a complete offer for 24k€, with a 40% subsidy reducing it to 14.4k€. If I also consider that thanks to the heat pump’s possible cooling function, I can skip the originally planned installation of even a minimal air conditioning unit in the living room, my cost comes down to about 10k€. (Yes, that’s optimistic math…).

For me personally, points 3 and 4 are so important that I will probably go ahead with the heat pump within the next 1.5 years. Whether it is the economically best decision? Ask me again in 20 years...

Best regards,

Andreas

Teryamy schrieb:

Now in summer 2024, I’m thinking: Well, now that things are back to normal, let’s do the math. And look at that: 8.2 cents vs. 31.0 cents. Oops, it no longer makes financial sense!?

Replacing a functioning gas heating system with low consumption, in my opinion, is financially unreasonable (whether a heat pump is ecological depends on green electricity, which can be debated). However, if a replacement is actually imminent, I would never swap a gas heater for a new gas heater today. Instead, go directly for a heat pump and plan for moderate heating costs in the future – this is my opinion and also that of many experts and professional real estate owners – while gas prices will increase disproportionately. The costs for CO2 levies, which are still moderate at the moment, are already reflected in the heating costs I charge my tenants. And if the price is fully deregulated in 2026, or if the certificates remain politically limited, you will be glad to have chosen the heat pump.